Professional Engineering

Output in the manufacturing sector rose at its fastest rate in 15 years in the three months to July, according to research by the Confederation of British Industry (CBI).

The CBI said demand for UK-produced goods had continued to strengthen in the second quarter but warned that manufacturing growth was expected to be slower in the third.

Of the 439 manufacturers surveyed by the CBI for its quarterly industrial trends survey, 38% said output rose during the last quarter, while 15% said it fell. This was the fastest growth seen since April 1995, and a marked improvement on the previous quarter’s flat performance.

Export demand was buoyant, the CBI said, with 28% of firms reporting a rise in export order volumes and just 11% a decline. A strong rise in domestic orders also helped boost output. 29% of firms said the volume of domestic orders rose, and 19% that they fell, giving a balance of +10% – the strongest figure since April 2004.

The total volume of new orders rose to +18%. The CBI said the rise in output was also driven by a shift in the stock cycle, during which firms build up inventories of raw materials and finished goods. 

Manufacturing output is expected to rise again in the next quarter, although at a slower pace, as growth in domestic and export orders is expected to moderate, the CBI said.

Ian McCafferty, chief economic adviser, said: “With demand for UK-made goods at home and abroad having strengthened, manufacturing production really stepped up a gear during the past three months.

“Production is expected to rise further, but at a more moderate rate.” McCafferty added that the risk of a double-dip recession remained low. “The fortunes of the manufacturing sector are continuing to slowly and steadily improve.

“It is encouraging that credit constraints are continuing to ease, and confidence about business and export prospects has risen for the fourth successive quarter.”

The percentage of firms citing credit problems as a constraint on output had fallen.